A:

Bonds usually can be purchased from a bond broker through full service or discount brokerage channels, similar to the way stocks are purchased from a stockbroker. Dealing with a bond broker can be prohibitive to some, however, because many require high minimum initial deposits. Another way to gain exposure in bonds would be to go in directly through a bond fund - a mutual fund that only purchases bonds.

When using a broker to purchase bonds, often you will be told that the trade is free of commission. What often happens, however, is that the price is marked up so that the higher price you are charged essentially includes commission fees. If the broker isn't earning anything off of the transaction, he or she probably would not offer the service. To determine the markup before purchase, look up the latest quote for the bond and use your discretion to decide whether or not the commission fee is a markup you are willing to accept. (To learn more about what to look for in a broker, make sure to read our related article Evaluating Your Broker.)

Government bonds work slightly different than traditional bonds. Some financial institutions provide services to their clients that allow them to purchase government bonds such as Treasuries (U.S.) or Canada Savings Bonds (Canada) through their regular investment accounts. If this service is not available to you through your financial institution, these securities can be purchased directly from the government. In the U.S., bonds can be purchased through TreasuryDirect.

To learn more about bonds, how they work, and how to obtain them, be sure to check out our Bond Basics Tutorial.

Hot Definitions
  1. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  2. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  3. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  4. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  5. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
  6. Inflation

    The rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of ...
Trading Center